People routinely seek second opinions from medical specialists yet many never consider seeking a financial second opinion. Just as your health decisions are important, the decisions involving your financial decisions are critical.
Why the difference in thinking? My opinion is they don’t know anything is wrong or what to check and why.
In many instances, I receive a call for advice (a second opinion) due to a lack of understanding and ultimately no clarity with respect to an existing financial plan. I have received two such requests in the last month.
The Problem – No Financial Clarity
Most don’t understand how they are invested, where their money is being invested, and the overall strategy of the wealth manager. This is most likely due to poor communication from the financial advisor working on their behalf.
There is usually little understanding about the investments, costs associated, advisor fees and the overall plan. Much too often, financial advisors just focus on wealth management leaving much to question, such as if the financial plan is tailored to the client. If the client does not engage the advisor in the right line of questioning an inappropriate plan could be extremely risky or costly .
Proper financial planning, done right, requires a lot of questions from both parties.
Why Do I Need a Second Opinion?
If you can answer “Yes” to any of the following you should seek a second opinion:
- I don’t know how I am invested
- I have no idea what I am paying my advisor
- I haven’t received any quarterly reports summarizing my investments
- I have no clue who my beneficiaries are
- My advisor has not reviewed my plan in several years
- I don’t know if my Living Trust is funded
- I am not sure if my account ownership is titled properly
- I have no clue what my net worth is
- No, I don’t have a budget and don’t know how much I am saving
- I am paying capital gains tax on investments that have lost money
- I don’t know if I have a Will, Durable Power of Attorney, Healthcare Surrogate, Living Will or other legal documents
- I think my attorney funded my living trust but am not sure
- I have no idea where my assets would go if I were to die
- I never thought about my children in the event of my death
These are just a few of the questions I encounter when I am contacted for financial second opinion or review.
Your financial advisor should have at the very least created a statement of financial condition and a basic budget. Why? Because this is basically an x-ray of what is going on inside your financial health. It is one of the first steps towards financial clarity for the financial advisor as well as the client.
Starting With Financial Clarity
There should be a written agreement (often called an Engagement Letter) explaining the services provided. Remember, every investor seeking planning is unique and the plan engaged should be tailored accordingly.
Many investors like to engage in relationships with more than one financial advisor and may only want to purchase one investment or open one account. This is fine, but the financial advisor should still ask questions in the interview process to make sure this a suitable relationship. This is where the breakdown begins in many cases.
Some just want the financial advisor to take orders. It is the responsibility of the financial planner to ask questions to make sure the requested service is suitable. If the investor refuses to disclose information needed to ensure an investment is appropriate it is the financial advisor’s responsibility to document that refusal and have the client verify the refusal in writing.
If a prospective client is unwilling to answer questions, I will not take the client. The reason? How can I provide clarity and do them justice if my potential customer does not disclose much-needed information?
If any of this struck a chord with you, please get a second opinion. It could save you a tremendous amount of money and stress on your part. Why fly blind? It is not necessary. A good financial planner can help you gain clarity and feel confident and relaxed about your financial plan.
Please feel free to contact me for a second opinion or to ask a financial question.
This information is not intended to give specific recommendations, investment, legal or tax advice. Advisory services offered through Nepsis Advisor Services, Inc.; an SEC Registered Investment Advisor.